Sebi today barred IKF Technologies from issuing any securities for a period of 10 years for engaging in fraudulent activities related to issuance of global depository receipts.
The capital market watchdog said the company provided false information in respect of initial subscribers to its GDR issues and diverted the proceeds.
Sebi Whole Time Member S Raman, in a 28-page final order, directed the company "not to issue equity shares or any other instrument convertible into equity shares or any other security for a period of ten years".
In an interim order, dated September 21, 2011, IKF was barred from issuing equity shares or any other instrument convertible into equity shares or alter their capital structure in any manner till further directions.
So far, the prohibition has been in place for about three years and seven months.
Hence, Sebi said the debarment period already undergone would be reduced from the ten-year ban period.
According to the order, IKF's submission that it was not aware of the identities of initial subscribers to GDR issues I & II, is incorrect.
For the first GDR issue, in March 2007, the original subscriber was British Virgin Island-based Seazun Ltd and for the second issue, it was one Vintage FZE. On both instances, IKF had informed Sebi that the subscribers were different.
Sebi noted that IKF did not have any free capital available from the GDR Issues I & II since the capital raised through these two issues were provided as security against loans taken by Seazun and Vintage from Banco and Euram, respectively.
"However, IKF concealed this crucial information and portrayed that GDR Issues I & II were successfully subscribed by few foreign investors thereby resulting in that company having free funds to the tune of USD 11 million at the time of GDR Issue I and USD 10.98 million at the time of GDR Issue II," the order said.
The modus operandi adopted by IKF in conceiving the fraudulent arrangement of GDR issues to defraud investors has been fraught with mala fides at every stage of its execution, Sebi said.
"The consequences resulting from violations committed by IKF are of very grave nature and are prejudicial to the interests of investors in the securities market.
"If violations of this nature and magnitude are not dealt with seriously with a firm hand then investors will lose faith in the Indian securities market and even good companies will find it extremely difficult to raise capital in future," it noted.
